Focus Financial Partners is reportedly preparing to file an S-1 document with the SEC as a precursor to its long-awaited plan to go public, according to industry sources.

Several sources in both the RIA world and the consolidator business said Focus executives were mentioning the IPO plans to both management executives it was recruiting and RIA firms it was negotiating with about potential investments.

As is common for companies preparing public offerings of securities, Focus executives declined comment.

If the IPO is ultimately successful, it would provide Focus with additional capital as well as a currency to accelerate its acquisitions of RIA firms. It could also pave the way for other consolidators such as Hightower to go public as well.

However, there are many questions surrounding Focus and other consolidators in the advisory space that remain unanswered: Who gets to sell their stock and when? What kind of liquidity will Focus shares have when and if it goes public? And what kind of a multiple will the financial markets assign to this consolidator?

Focus owns majority interests in some of the nation’s leading RIA firms, including the Colony Group in Boston; Buckingham Asset Management (BAM) in St. Louis; LLBH Private Wealth Management in Westport, Conn.; and Flynn Family Office in New York City. In the last two years, it has started to use these firms and others as vehicles to acquire smaller RIA units. Buckingham now has almost $6.7 billion in assets under management while the Colony Group is approaching $4 billion.

The issue of whether certain investors receive preference in the timing of when they can sell their shares was a troublesome one for at least one consolidator that went public in 2003. Apollo Global Management, which backed Jessica Bibliowicz’s National Financial Partners (NFP), was able to sell its shares almost immediately after the IPO, while most advisors affiliated with the firm were restricted for several years.

This meant that private-equity giant Apollo was able to sell NFP shares as they soared from an IPO price of $23 per share to north of $50, while many advisors were stuck and couldn’t sell their equity until years later. In some cases, the lifting of sales restrictions came after the stock price collapsed into the teens and ultimately single digits during the financial crisis.

By then, Apollo reportedly had sold more than 90 percent of its position. Madison Dearborn Partners, a Chicago-based private equity firm, ultimately took NFP private in 2013 at $25 per share, or $1.3 billion. It went public at $23 a share.

Since it was started by former McKinsey consultant Rudy Adolf and first backed in 2007 by Summit Partners, a growth-oriented private equity firm in Boston, Focus has obtained capital via additional rounds of financing from Polaris Ventures and, most recently, Centerbridge Capital Partners, which invested $216 million in July 2013. Centerbridge, which bills itself as a private equity and distressed debt investor, is believed to own about 40 percent of Focus’s equity and probably is calling the shots when it comes to decisions about the IPO.

Centerbridge was able to gain a major share of equity in Focus and dilute earlier investors such as Summit after Focus ran into financial problems following the financial crisis, when many RIA firms saw their profits dry up as revenues dropped 30 percent or more in 2009. Focus executives said they had always planned additional rounds of capital raising, but it’s doubtful they anticipated and budgeted for the Great Recession.

Before Centerbridge made its investment in 2013, Summit, facing serious dilution, reportedly retained Goldman Sachs to find a buyer or explore the possibility of an IPO. But then both the debt and IPO markets were not nearly as receptive as they are today—and Focus was still a younger, less financially secure company than it is now.

According to sources and public statements by Focus executives, the firm is believed to have about $500 million in debt and another $220 million or so in preferred stock outstanding. In the last month, Focus has doubled its credit facility to about $1 billion. Earlier this year, the firm reportedly also borrowed about $75 million, giving investors a chance to sell back stock on a pro rata basis.

In 2013, Focus reportedly generated about $270 million in revenue and about $56 million in EBITDA (earnings before interest, taxes, depreciation and amortization). At present, its annual revenues are believed to be about $325 million.

Sources familiar with the way Focus structures its deals with advisors say it owns 100% of the assets of firms it acquires. However, the transactions typically leave the RIA operators with 40% to 49% of cash flow, plus varying combinations of Focus stock and cash. This means that Focus, combined with its network of firms, might generate as much as $120 million in EBITDA before paying management at headquarters as well as minority interests to various principals at its constituent RIA firms.

One source estimates that the actual amount of cash flow Focus retains is closer to the $70 million to $75 million area. That would exceed the $50 million minimum in EBITDA that most investment bankers consider necessary to do an IPO.

What kind of price-earnings multiple would the equity market assign to Focus shares? Given that most of its revenues come from asset-based management fees, it undoubtedly has a more predictable revenue stream than NFP, whose network comprised many transaction-oriented insurance and estate planning firms. Yet Focus also owns some hybrid RIAs that earn commissions as well as fees, so its revenue stream is not purely fees.

Comparisons to other micro-cap and small-cap firms in the advisory space are inexact and problematic because the few publicly held firms in this business all have somewhat disparate business models.

Boston Private Financial Holdings, another firm with an RIA network, sports a market capitalization of $1.1 billion ($1.2 billion including debt) and has pretax income of about $100 million. However, Boston Private owns a private bank and an investment management unit, so its revenue mix differs significantly from that of Focus.

Silvercrest Asset Management serves ultra-high-net-worth clients with average portfolios of $30 million, which is typically less profitable than an RIA serving middle-class millionaires because rick folks in that bracket don’t let their advisors charge 70 to 100 basis points in annual AUM fees. However, it also runs a proprietary asset management business, where margins can be substantially higher.

Silvercrest is much smaller than Boston Private, or Focus for that matter. The firm has about 7.8 million shares outstanding and recently traded at about $13 a share. Many believe the only reason Silvercrest went public is that its former major shareholder, Microsoft co-founder Paul Allen, wanted to unload the investment and focus on other holdings like the Seattle Seahawks and Portland Trail Blazers.

Silvercrest principals reportedly were equally eager to part ways with Allen and other private equity investors. With a market capitalization of just over $100 million, its stock trades about 59,000 shares a day, or 0.76% of its shares outstanding.

There is no guarantee that Focus will file an S-1 or, if it does, that its subsequent IPO will be successful. The IPO market has been fixated on social media and biotech companies, so a business model based on consolidating older advisors approaching retirement and looking to take some chips off the table may offer little sex appeal.

Over the long term, the success of Focus and other consolidators will hinge on their ability to grow each firm organically—not through acquisitions. Focus firms like Buckingham, Colony and LLBH have achieved impressive internal growth, but it’s not clear what the experience is across the entire network. If Focus becomes public, that picture will become clearer. Going forward, it will also be interesting to see if Focus uses stock options and other incentives to reward RIAs based on performance.

One of the problems NFP encountered was that after advisors sold a majority interest in their businesses, many started to coast along or, in a few cases, retire on the job. Eventually short sellers at hedge funds spotted the trend and made a killing as NFP shares dropped from over $50 a share to low single digits.

With more than $700 million in debt and preferred stock, the consolidator would need an enterprise value (combined equity and debt) of more than $1 billion to make the public offering worth its while. Ideally, if Focus could get a market cap (of equity alone) of $500 million, that would permit it to reconfigure its balance sheet, reduce its debt and especially its expensive preferred stock. Commanding that kind of valuation could be a very tall order.